Denise Wu explains how you can make strategic decisions that avoid degrading mission-critical functions or short-changing agency priorities.

The New Normal: Major Cuts Require a Strategic Approach

2/11/2013

The New Normal: Major Cuts Require a Strategic Approach

by Denise Wu

Government agency leadership is heading in a new direction, and the signs are everywhere. At the January AGA Federal Financial Systems Summit, Office of Federal Financial Management Controller Danny Werfel stressed the importance of agencies working smarter. A current SBA job announcement calls for candidates to “implement best practices for operational excellence which includes re-engineering work processes.”

Achieving significant savings and re-engineering work processes are permanent aspects of agency leadership. Given the fiscal reality, managers can no longer rely solely on administrative savings and increased program efficiencies to meet continuing budget shortfalls. Instead, they must use the new budgetary “normal” to right-size their operations: reduce, consolidate, and terminate programs in order to live within means and still support high-priority initiatives.

Government leaders must take the opportunity to grow capabilities that revolutionize their organizations. Right-sizing requires strategic planning and a structured process to identify opportunities and implement changes. Growing capabilities wisely creates long-lasting value that surpasses the management of human resources and technology, capital assets, property maintenance, and contract monitoring.

The following steps summarize how decision-makers can create long-term value while enhancing mission delivery and outcomes.

Collaborate

The organization should first establish a process for engaging with top management, facilitating communication, implementing cost-reduction efforts, and prioritizing programs. Consulting with key stakeholders early and throughout the process is critical for exploring options and refining analyses of benefits and risks. Challenge senior management to engage in candid discussions about which costs are important and why.

Prioritize

Distinguish goals that are the highest priority and identify low-priority programs and functions. The low-priority programs represent potential opportunities to terminate, consolidate, or scale back operations that are obsolete, ineffective, duplicative, or too costly. List preliminary opportunities to achieve savings in current and future years. Identify and evaluate the risks and benefits of executing reductions and obtain input from the senior management team.

Grow

Expanding capabilities requires an ongoing strategy that builds sustaining skills, processes and systems step-by-step to elevate organizational strength. Be certain to effectively and efficiently manage organizational complexity (and make the appropriate trade-offs) to grow capabilities while reducing significant costs. Consider changing cost models to expand in areas that will help create and drive organizational value and enhance mission delivery.

Crises can lead to powerful transformation for leaders who are willing to revolutionize their organizations. Don’t just scratch the surface or default to spreading the pain “evenly.” Think strategically, while balancing the legislative and political ramifications. The results should be a leaner organization delivering more value to your constituents.

This article first appeared in the Association of Government Accountants’ (AGA) Topics newsletter.

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